A broad sell-off has sunk the ASX today after the bourse started the morning in the green.
The S&P/ASX200 is lower today, dropping 92.50 points or 1.31% to 6,946.20 and setting a new 20-day low. Over the last five days, the index has lost 2.27%and 6.69% over the last 52 weeks.
Bottom-performing stocks were New Hope Corporation Ltd and Link Administration Holdings Ltd down 8.57% and 6.84% respectively.
The fledgling early rally didn’t last long as the downward trend set by the US and European markets took hold.
A recession is now imminent in the US and is weighing down markets.
“Although a recession is imminent for the US, the duration will be short – first half of 2023 – and shallow – an average of -0.4 per cent per quarter,” QIC chief economist Matthew Peter said.
Some economists have already put the US in recession.
“[It is] led by tight financial conditions, an industrial cycle in retreat and interest rate-sensitive sectors of housing and retail now showing increasing signs of fragility,” Yarra head of macro and strategy Tim Toohey said.
It is hoped a major US oil and gas-led expansion will settle things down.
“The US is now the largest oil and gas producer in the world and a rapid recovery in oil and gas production in the second half of 2023, continuing into 2024, means that the US recession of 2023 will be quite shallow and the recovery quite healthy,” Morgans chief economist Michael Knox said, while forecasting a contraction in the first two quarters.
To the contrary, Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:NYSE:GS) say the US can avoid a 2023 recession.
“The US can avoid recession in 2023 given fading headwinds from tighter financial conditions and fiscal drag, rising real incomes and an adjustment in excess labour demand that occurs via the scaling-back of expansion plans, rather than widespread redundancies,” Goldman Sachs (NYSE:GS) chief economist for Australia and New Zealand Andrew Boak said.
What's making news
China also weighing heavily on markets
China’s economy ended 2022 in a slump, due to a plunger in consumer spending in December.
More disruption is likely in the first few months of 2023 as COVID-19 infections surge.
China has been hit hard by declines in manufacturing and the services sector.
COVID-19 continues to have a major impact with the outbreak keeping people at home and while it seems to have peaked in Beijing, where economic activity is starting to rebound, the travel rush expected by border reopenings could spread COVID-19 far and wide.
China’s open borders present a double-edged sword for the world’s economies.
While central banks are trying to stave off recessions via cash rate increases, increased demand could support corporate earnings and offset weak growth in the US and Europe.
The problem is that any extra cash in the economy is likely to impact inflation.
So, what is a central bank to do?
“When you’ve got a COVID wave like we’re seeing in China – when they’ve had until quite recently a zero-COVID approach to managing the pandemic – then that has obvious consequences for the Chinese workforce and for supply chains right around the world,” Australia’s Federal Treasurer Jim Chalmers said.
Chalmers called the impact of COVID in China one of the “key risks” to Australia’s economy.
The share market would continue to take a hit if inflation continues to rise on the back of what is happening in China.
While consensus suggests the Reserve Bank of Australia (RBA) will pause any rate rises, the China situation may force the RBA to continue its current trajectory.
Five at five
Magnis Energy Technologies starts certification of lithium-ion batteries produced at iM3NY plant in New York
Magnis Energy Technologies Ltd (ASX:MNS, OTCQX:MNSEF) has completed an internal qualification process to ensure cells being produced at the iM3NY Lithium-ion Battery Plant in Endicott, NY meet specifications.
Read more
Meeka Metals grows Turnberry gold resource to 685,000 ounces; lifts Murchison total to 1.2 million ounces
Meeka Metals Ltd (ASX:MEK) has updated the mineral resource estimate (MRE) for the shallow, high-grade Turnberry deposit within the 100%-owned Murchison Gold Project in Western Australia by 12% to 10.6 million tonnes at 2.0 g/t gold for 685,000 ounces.
Read more
Tietto Minerals to deliver first gold pour at Abujar within 10 days; wet commissioning begins
Tietto Minerals Ltd (ASX:TIE) is expected to deliver its first gold pour within 10 days at the 3.45-million-ounce Abujar Gold Project in Côte d’Ivoire, West Africa.
Read more
Xantippe Resources confirms large lithium-bearing brine zone at Carachi in Argentina
Xantippe Resources Ltd (ASX:XTC, OTC:XTCPF) has identified a potentially large lithium-bearing brine zone during a geophysical survey at its Carachi Project in the lithium-rich province of Catamarca, Argentina.
Read more
Core Lithium achieves “major milestone” with loading of first DSO shipment
Core Lithium Ltd (ASX:CXO) has shipped its first direct shipping ore (DSO) lithium load from Darwin Port, marking a major step forward in the growth of the company and the Northern Territory’s renewable and critical minerals industry.
Read more
On your six
The 100 best-performing companies in 2022
The ASX All Ordinaries index lost about 7% over the course of the year, but there were plenty of companies that bucked the trend.
Read more